Stock managers are taking a closer look at the digital currency market. Whether because of disruptive innovation in the capital market or the security of cryptography that has made cryptography an alternative to reserve value against monetary-based inflation. After much hinting that Bitcoin was a craze among millennials and enthusiasts, the traditional market has "burned out the tongue" and is chasing after companies in the industry. This is the case with Coinbase shares.
First they claimed that Bitcoin was not regulated and used for illegal internet transactions, but that has already been demystified. A major regulatory barrier was overcome when, in July last year, the U.S. Office of the Comptroller of Currency (OCC) allowed national banks could custody crypto assets. Here in Brazil, Leão has already found a way to tax investments. With RFB Normative Instruction No. 1,888, accountability for all operations involving cryptography, of any type, is mandatory. With the adoption of a self-regulation code – like the National Advertising Self-Regulation Council, Conar – Brazilian brokerages sought to ensure more security and transparency for investors. Exchanges were then the only options for trading bitcoin and other cryptocurrencies. Now, through the Exchange Traded Funds (ETF), you can already expose yourself to this market. ETFs are investment funds that reproduce a certain index. Unlike brokerages, ETFs are traded on B3 (B3SA3) and are regulated by the CVM. So the difference is that theoretically now the investor will have extra security, but he pays for the fund's management fee. Brazil's first cryptocurrency ETF on B3 debuted on April 22. The Hashdex Nasdaq Crypto Index (HASH11), and gives retail investors access to the main cryptocurrencies in the market. In addition to it, QR Asset Management intends to launch the ETB QBTC11 which will have its exposure 100% in bitcoin. For the unskilled investor who is still afraid to expose himself to the crypto market, cryptocurrency funds have proven to be a good option, which offer a little more protection because they have part of the portfolio invested in fixed income, which sacrifices a little of the income compared to direct investment in assets.
Who is buying these papers
With an offer price of U $ 381 and a market value of approximately U $ 100 billion, Coinbase was one of the largest IPOs ever made at Nasdaq. A very relevant milestone for the traditional financial market. G2D, GP Investimentos' venture capital holding company for global businesses, has just received a hefty sum of US $ 5.9 million, or more than R $ 30 million with this Coinbase listing on the Nasdaq. The company was an investor in the brokerage through funds and with the sale of the shares it made a profit of US $ 5.2 million – something equivalent to 700% of the value of the asset recorded in the December balance sheet.Currently, the stock is quoted below the prices offered in its IPO.
What is the investment thesis
I will mention some important points that make the investment thesis at Coinbase a good choice in the portfolio of more conservative investors.
We are only at the beginning of the crypto market history
You should already be aware that it all started in 2008, when Satoshi Nakamoto created the Bitcoin protocol. Since then, enthusiasts and Cypherpunks trade their digital currencies on the Blockchain. They also tried to create the ecosystem that today supports the financial instruments of foreign exchange, loans, contracts, derivatives, custody and others. For the same purpose, Coinbase has forged itself as the digital exchange to facilitate the purchase and sale of crypto. Created in 2012, today it intends to make this service available to all 3.8 billion smartphones in the world.Source: https://troposlab.com/
Lots of innovation to come
You just have to follow the news that come out in Cointimes to realize that new technologies are being introduced in this sector at all times. Cryptocurrencies of all types make use of the technology known as blockchain. Block chains act as decentralized systems for recording and documenting transactions that take place involving a specific digital currency. The Trend Insight report by analyst Gartner made the following prediction:By 2022, only 10% of companies will achieve any radical transformation using blockchain; By 2022, at least one innovative business built on blockchain technology will be worth $ 10 billion; By 2026, the commercial value added by the blockchain will increase to just over $ 360 billion, then by 2030 it will increase to more than $ 3.1 trillion.Certainly Coinbase will also benefit from this trend.
Defi: access of financial products to the population.
Decentralized finance (Defi) offers instruments from the traditional financial world to the world of cryptocurrencies. It is a fundamental part of the crypto ecosystem that we mentioned above. They will offer everything that a traditional bank offers – transactions, loans, mortgages – but without the need for a mediator. They also function as Stock Exchanges, where there is no intermediary between the investor and the investment. The transactions, then, are guaranteed by "smart contracts". Much like Coinbase's proposal, don't you think?
Institutional investors are just beginning to invest
Bitcoin started to rise in October 2020, and its growth was driven mainly by institutions and large corporations. In these several months, the price of bitcoin has increased about six times after massive purchases from companies like MicroStrategy, Tesla, MassMutual and others. Institutional investors, mostly users who are buying very high values and have a long-term profile with custody made outside the brokerage firms. This causes a reduction in the supply of bitcoins available for sale in the largest brokerages in the world, generating the appreciation of the currency. Currently, it is estimated that about 6.5% of Bitcoin's money supply is in the possession of the institutional market, according to the Bitcoin Treasuries website. This argument only makes sense if you realize that Bitcoin and Coinbase's shares are correlated.
The Bitcoin network and currency have proven to be safe, functional and efficient. The technology used to build Bitcoin is mathematically protected by cryptography and is constantly being enhanced by the open source community. The software is actively inspected and audited by this growing community. In addition, Coinbase can boast that it has never been hacked. She said that 0.004% of her users experienced “account hacks” last year, where someone breached their devices and then gained access to their Coinbase accounts. The company said it has educated its users on how to keep their accounts secure and invests heavily in information security. I will add an important warning. If you do not have access to your private keys, you do not have custody of your satoshis. Stay smart!
The valuation, which was US $ 8 billion in 2018 and US $ 77 billion in February, reached US $ 100 billion in the company's IPO process. The customer base has also more than doubled in recent months. Supported by brokerage fees, sales also skyrocketed, reaching US $ 1.8 billion in the first quarter – more than the total in 2020, of US $ 1.3 billion, which, in turn, had already been more than double revenue in 2019 ($ 533.7 million). Net profit jumped to $ 730 million, also above the profit recorded last year of $ 527.4 million. The volume traded by the exchange was from $ 193 billion over the past year to $ 335 billion in the first quarter, and total assets under management skyrocketed from $ 90 billion last December to $ 223 billion in March.
The “good student” in the market
Much praise from investors goes to Coinbase CEO Brian Armstrong. With a competent manager, regulatory compliance, appropriate licenses and governance transparency, the “good student” in the market added some credits among the investors who chose the company's stock. The 38-year-old billionaire was a software engineer at Airbnb for about a year (started in 2011). Before that, for almost a decade he was CEO and founder of UniversityTutor.com, an online tutoring site. He received a master's degree in computer science from Rice University in 2006.
All of these points support the company's investment thesis, as well as reinforcing the upward trend for the cryptocurrency market. This may explain the correlation between the two. No information disclosed here is an investment recommendation. The only thing I recommend is that you keep your private keys well so you don't end up like this guy here: Politician loses R $ 140 million in bitcoin, see what happened. Now, if you are a cypherpunk, don't let the bubble burst! Follow the most relevant news from the crypto market on Cointimes Telegram.